That was when Silver Bird BOLDLY announced that it wants to buy Stanson Group. Yeah, boldly. It was a 54 million transaction. The sticky (or shall i call it 'sicky') issue was.... the profitability of Stanson.

Here's a screen shot from the word file attached to the above announcement.

How would you interpret the financial track record of Stanson?

Me? Sceptical. My reasoning? Stanson only showed profit the very same year Silver Bird announced it wants to buy! For me, where is the justification????

And if you scroll down to section 9.0 of the word file, you would note that this is a RELATED PARTY TRANSACTION!

Yeah man. A RPT Transaction worth 54 million!!!!

That sum was later revised lower to rm46.6 million. Yeah, sadly, somehow Silver Bird's purchase of Stanson Group was approved. Mentioned on an article on Star Biz: (link broken)

Thursday January 15, 2004

2004 looks promising for Silver Bird

SILVER Bird Group Bhd looks set for an eventful 2004.

The company expects its proposed one-for-two bonus issue and the subsequent transfer of its listing on the MSEB second board to the main board to be completed in the next 30 days or so.

Its proposed acquisition of bread maker Stanson Group Sdn Bhd should also be completed by the first or second quarter this year.

In addition, its new bakery plant in Shah Alam would soon boost its installed capacity by three-fold.

Yesterday, at Silver Bird's EGM in Kuala Lumpur, shareholders approved the proposed bonus issue. Minority shareholders also voted unanimously to acquire Stanson Group for RM46.6mil, to be satisfied by the issuance of a combination of Silver Bird shares and loan stocks.

Silver Bird groupmanaging director Datuk Jackson Tan and parties related to him, being the vendors of Stanson Group, abstained from voting on the Stanson proposal.

Speaking to the media later, Tan said the new bakery plant, which he described as the biggest in South-East Asia, would allow the company to churn out new products faster than its competitors.

It would also put Silver Bird in an enviable position to take advantage of trade liberalisation under the Asean Free Trade Area and to penetrate regional markets with its range of products, he added.

The company's growth locally looked promising, he said.

Instead of relying on stockists, Silver Bird had its own fleet of vehicles and salesmen who go around ensuring that its products were well stocked at more than 5,000 distribution points, he said.

Over the next two years, the distribution points would be doubled, said Tan, who expects Silver Bird's sales to grow faster than the industry average of some 10% annually.

He declined to be more specific, but said the new bakery plant and a planned advertising campaign of a few million ringgit would make for “exciting sales growth” this year.

For its fiscal year ended Oct 31, 2003, Silver Bird posted a net profit of RM10mil on a turnover of about RM51mil, compared with RM9.2mil and RM45mil, respectively the prior year.

SILVER Bird Group Bhd, which is installing the single largest stand-alone bakery in Asean costing RM100mil, is confident it can double its net profit for the fiscal year ending Oct 31 to RM20mil, from RM10mil last year.

“The plant will not only help Silver Bird lead the industry in Malaysia but also allow the company to expand its business offshore when the time is right,” group managing director Datuk Jackson Tan told reporters in Kuala Lumpur yesterday after the company’s transfer to the MSEB main board.

The state-of-the-art plant, purchased from US-based AMF Bakery Systems, would also provide the leverage for the company to become a leading bread producer, he said.

“Our first production line was completed ahead of time and the facility is already rolling out our High 5 bread,” Tan said, adding that the second line should be operational in a couple of months. .

Silver Bird has about 30% market share of the local bread business and produces 11 products under the High 5 brand. They are distributed through its 7,000 outlets, which the company expects to expand to over 10,000 by next year..

Tan said the local bakery industry was worth more than RM1bil a year, and growing in excess of 12% per annum.
He said the transfer of the company to the main board will enhance business reputation; promote greater customer, supplier and employee confidence; and attract financiers and investors.

“It will also enable us to compete with other major brands and, ultimately, improve our market position and market share,” he said.

At the start of trading yesterday, shares of Silver Bird put on 3 sen to RM1.23 with 50,000 shares changing hands. The counter closed the day at RM1.15 on total volume 1,074,000 shares.

100 million for a bread factory????

100 million???

I like one comment posted on this blog the other day. "Lot's of dough for a bread factory!"

Tell me.... are you impressed?

And then came Nilai Sept 2006. SIlver Bird's Nilai plant was forced to closed for a couple of weeks when it was alleged that the plant was unhygienic.

SILVER Bird Group Bhd, a bakery firm, plunged into a fourth quarter net loss due to provisions or money set aside to cover potential losses from its cake and frozen products business.

Its fourth quarter loss for the period to October 31 2006, dragged the full-year numbers into the red as well.

“For the financial year ending 2007, given a challenging environment, the group is focused on regaining market share based on an aggressive promotion and expansion campaign,” it said in a statement to Bursa Malaysia.

The company also planned to reduce costs further.

Silver Bird fell into a net loss of RM51 million in the fourth quarter as against a net profit of RM7 million in the same period a year ago.

Quarterly revenue rose 11 per cent to RM150.1 million.

For the full year, Silver Bird made a net loss of RM48.2 million compared with a net profit of RM22.2 million in 2005.

It blamed the fourth quarter losses on a RM28 million impairment loss and a RM7.8 million write off. The impairment losses were from its cake and frozen products business.

“Our sales in cake and frozen products have declined significantly and the trend is foreseeable not to reverse in the near future,” it said.

The directors decided on the provision “as the budgeted net cashflow or operating profits from the cake and frozen products, which were significantly lower than expected.” As for the write off, the amount was due to the assets of its discontinued bakery café business.

Anyway, this is a really good example on RPT. A 46.6 million RPT was made on a company which had a pretty lousy track record.

And of course, the dangers of a plc embarking on highly suspect investment/capex ( 100 million for a bread factory? Did they even ask how many loafs of bread they need to make to recover back this 100 million? )